The Money Flow Index (MFI) is a momentum indicator that measures the strength of money flowing in and out of a market. Look for divergence between the Money Flow Index and the current price. If the price moves higher and the MFI moves lower a reversal may be imminent.
Refer figure below. Look for possible market tops when the MFI is above 80. Look for possible market bottoms when the MFI is below 20. This study is very similar to the Relative Strength Index, however, the Money Flow Index includes Price and Volume in the calculation.
Properties
Bars = Number of Bars to use in the calculations.
Average = Number of N periods used in the optional moving average.
Formula
Money Flow = Price * Volume
Money Ratio = Positive Money Flow Sum / Negative Money Flow Sum
Money Flow Index = 100 – ( 100 / ( 1 + Money Ratio))
